Will market conditions normalise in 2023?
Global liquidity and credit markets are closely linked. The more liquidity - or purchasing power - in the system, the lower borrowing rates are. Central banks, such as the Federal Reserve, impact liquidity conditions through their monetary policy actions. For example, a slimmer balance sheet and higher interest rates means lower liquidity and thus more volatility across credit markets. Below is some of the latest research on these crucial topics that will likely define 2023 in a meaningful way.
Senior secured loans offer similar characteristics to high-yield credit, but with a few added benefits, such as sitting higher in a company’s capital structure.
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Both headline and core inflation are on course to remain stubbornly high well into 2023. As such, central banks will likely maintain their monetary policy stance for a while.
The global financial system's plumbing - i.e. various channels of liquidity - has been under stress due to the Fed's tightening campaign. Will the central bank pivot soon?
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Quantitative Tightening (QT) may have already affected economies as global purchasing power under a strong U.S. dollar was reduced.
Over the past year, global credit has been in the middle of a storm caused by a drought of liquidity due to tighter monetary policy. Will 2023 be any different for this sector?
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If bond rates normalise, equity valuations may follow suit. However, this depends on what central banks decide to do in the coming months.
The U.S. dollar remains the world's most important currency, both in terms of global trade and financial stability.
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What can markets expect of monetary policy in 2023? This paper offers a few potential paths for central banks.
Private credit remains an attractive asset class in the fixed income sector as global allocators look for income and capital growth in the new normal.